Some Keywords are highly competitive.
Some advertisers just want to be on top by bidding too high.
Point to be noted here is that, it is not Your Bid that you are charged for, rather it is the bid of the ad just below you that determines what You pay.
You can beat the highest bidder through Smart bidding strategy. She will feel the heat of the competition only when you make her pay for the position and force her come below you. Once bitten twice shy!
Two automated rules does your job smartly.
Just choose the position you want to target your immediate competitor, say 1. Now set the rule of increasing the bid by 20% whenever your position is worse than 1, and also set another rule simultaneously, to decrease the bid whenever the position is better than 2.
When your aggressive competitor will start really paying for what she is aggressively bidding, she will be forced to run out of the competition and will change her strategy. Note you pay according to what the advertiser below you bid and not what you bid, that is just the limit.
Slowly you will find your aggressive competitor adopting a more rational bidding strategy, giving you room to move up.